Turkey Bond Yields Drop to Record Low as Trade Deficit Narrows

Nov. 30 (Bloomberg) -- Turkey’s bond yields dropped to a
record as its trade deficit contracted for a 12th month on
weaker domestic demand, supporting bets the central bank will
cut interest rates next month.

Yields on two-year benchmark debt slid 5 basis points, or
0.05 percentage point, to 5.93 percent at the close in Istanbul,
the lowest since at least 2005. The lira lost less than 0.1
percent to 1.7864 per dollar.

Turkey’s trade gap shrank to $5.5 billion in October from
$8 billion a year earlier, the statistics office in Ankara said
on its website today. The reduction will help narrow the
nation’s current-account deficit, which contracted for an 11th
month in September. The inflation rate fell to 7.8 percent last
month from 10.5 percent at the end of 2011.

“Today’s data supports the central bank’s accommodative
monetary policy and, in this sense, a rate cut,” Ibrahim Aksoy,
an economist at Seker Securities in Istanbul, said in an e-mailed statement today.

The trade shortfall was expected at $7.5 billion, according
to the median estimate of eight economists surveyed by
Bloomberg. Imports dropped 5.6 percent to $18.8 billion and
exports increased 12 percent to $13.3 billion.

The lira’s decline today pares its gain this month to 0.3
percent. The benchmark yield has slumped 115 basis points this
month in the biggest retreat among the emerging markets tracked
by Bloomberg.

The improvement in risk appetite for Turkish assets may
increase “appreciation pressure” on the lira, according to a
central bank report on financial stability published yesterday
on its website.

“Given today’s merchandise trade figures, October’s
current-account deficit is also likely to show a sharp
narrowing,” Melis Metiner, an economist at HSBC Bank AS in
Istanbul, said in an e-mailed note.